Couple Charged with Disney Insider Trading Scheme

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disney-insider-trading-schemeThe SEC has charged two people with insider trading of Walt Disney (DIS) shares. One is Bonnie Jean Hoxie, an assistant to a senior Disney executive; the other is her boyfriend, Yonnie Sebbag. The two sent letters to 20 hedge funds saying that they were willing to sell advance information about Disney's second quarter earnings.

The complaint, filed in the U.S. Southern District of New York, alleges that "the case involves a brazen scheme to sell material non-public information to various hedge funds with the expectation that the funds would trade based on the information provided. The defendants are Hoxie, an administrative assistant to a high-level executive at The Walt Disney Company ("Disney"), and her boyfriend, Sebbag. Beginning in March 2010, the defendants sent numerous hedge funds anonymous letters offering to provide the funds with inside information about Disney's quarterly earnings in exchange for a fee. In early May, Hoxie obtained pre-release results for Disney's second quarter 2010 ("2Q-2010") and provided it to Sebbag. Sebbag then sold the confidential information to an undercover agent from the Federal Bureau of Investigation ("FBI"), who was posing as an investment manager."

The alleged actions of the two violate the anti-fraud provisions of federal securities laws.

The SEC complaint describes Sebbag, 29, as a resident of California. In various communications, he used the alias "Jonathan Cyrus. Hoxie, 33, is also a resident of California, and in her role as administrative assistant to a high-level Disney executive, had access to confidential information concerning the company's financial performance and operating plans. Hoxie had signed a confidentiality agreement with Disney.

The two communicated with hedge funds by letters which read: "Hi, I have access to Disney's (DIS) quarterly earnings report before its release on 05/03/10 [sic]. I am willing to share this information for a fee that we can determine later. I am sorry but I can't disclose my identity for confidentiality reasons but we can correspond by email if you would like to discuss it. My email is eilatcap@gmail.com. I count on your discretion as you can count on mine. Thank you and I look forward to talking to you."

In communications with FBI undercover agents, Sebbag allegedly said: "I dont [sic] think we will get caught if we stay discret [sic] and careful. You can count on my discretion as i am counting on yours.... In regards to the earning reports, i will email it to you as soon as i have it and we'll make arrangements for the payment via wire transfer once you have it. Can you please make me an offer based on the money you think you will be making from the trade and the risk i am taking giving away this information to you? Also, i am looking forward to building a strong business relationship with you for future quarters and information."

Clearly, these criminal masterminds weren't discreet enough.
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